Economic Growth and Human Networking

The purpose of study is to examine the role of guanxi or human networks on economic development. We are concerned with dynamic interdependence between wealth, guanxi and human capital in a neoclassical growth model. Guanxi changes due to investment in human networking and can affect productivities of economic activities. Establishing guanxi costs time, consumer goods and capital goods. We introduce guanxi into the Solow-Uzawa growth model. We simulate the nonlinear dynamic model. The economic system has a unique stable equilibrium point. We are mainly concerned with the effects of changes in some parameters on the equilibrium and transitional processes of the economic dynamics. We get some insights into interdependence between guanxi and economic growth. For instance, if trust deteriorates among member of society which results in a rise in deterioration rate of guanxi, then the guanxi becomes weaker and the human capital falls; the household spends more hours on establishing guanxi and less hours on work; the national output, national capital and national output fall; the wage rate and rate of interest fall; and the per household wealth and consumption levels of two goods fall.